Why Democrats are to blame for consumer agency debacle

Leandra English (left), who claims to be the acting director of the Consumer Financial Protection Bureau, meets with Sens. Chuck Schumer and Elizabeth Warren at the Capitol on Nov. 27. | Mark Wilson/Getty Images

President Donald Trump is likely to control the Consumer Financial Protection Bureau for years to come. And Democrats have only themselves to blame.

Trump budget director Mick Mulvaney and Leandra English, a legacy employee of the Obama presidency, faced off on Monday over which of them has the authority to lead the bureau amid dueling statutes after CFPB Director Richard Cordray abruptly stepped down on Friday.

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Mulvaney and English showed up for work and started directing employees, both attempting to use the wide-ranging power that Democrats granted the director when the agency was created in 2010.

The matter ended up late Monday in the courtroom of U.S. District Judge Timothy Kelly, a Trump appointee, with English contesting Mulvaney’s right to start running the agency. That was after Mulvaney showed up Monday morning, boxes of treats in hand — doughnut diplomacy — and took over Cordray’s vacated office. The two sent dueling memos to the staff claiming control.

But while the process plays out in court, the turmoil highlights how Democrats shunned Republican efforts to broaden the governance of the fledgling agency from a single appointed director to a bipartisan commission that would have included members with diverse political viewpoints.

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The CFPB, a brainchild of liberal Massachusetts Sen. Elizabeth Warren, was created by the landmark Dodd-Frank Act as an independent agency run by a presidential appointee with vast unilateral power — and now the president making the appointment is Trump.

Kelly called the legal morass “extremely important and complicated” but gave no sign he was in a rush to rule on the matter. Meanwhile, Warren raised her own questions about how Mulvaney can legally use OMB resources, including staff, while performing duties as acting director of the consumer bureau.

In truth, the bureau has been mired in controversy since its creation. Warren has built a political career railing against Wall Street. Cordray infuriated industry and inspired lawsuits. And the bureau itself is unique, investing great power in one person with almost no accountability.

It was predictable that such a toxic mix would eventually explode. Now Democrats are facing the consequences of their decision to protect the agency’s powerful independent director. Anybody Trump nominates to replace Cordray will have the ability to undo a lot of his work. On Monday, Mulvaney wasted no time, imposing a regulatory and hiring freeze.

Business lobbyists weren’t exactly gleeful. While they had long griped about Cordray’s leadership and were happy to see him go, they have also argued that the most important reason to replace the bureau’s director with a commission is to make transitions like these smoother.

“We’re going to be right back in this predicament in five years; Republicans and Democrats are both to blame,” said Richard Hunt, president of the Consumer Bankers Association. “What we’re trying to do is stop the pendulum from swinging so far from left or right.”

Andrew Pincus, a partner at Mayer Brown who served in the Clinton administration, said the dispute over who will run the agency in the short term is pointless.

“Why do this?” said Pincus, a Democrat. “Maybe even if you were wildly successful it would give you another couple weeks. The downside is it confirms the view of people that the CFPB structure has problems.”

“It’s just hard to see the strategy that’s going to ultimately help the CFPB,” Pincus said.

For Democrats, there seemed to be a political strategy.

The party and its consumer allies are leveraging the Mulvaney-English conflict to elevate the watchdog agency’s status and cement its place in the psyche of Americans. Pro-CFPB demonstrations on Monday by the National Community Reinvestment Coalition will be followed by an anti-Mulvaney rally on Tuesday by the Progressive Change Campaign Committee.

Meanwhile, English made the rounds in Congress, meeting with Senate Minority Leader Chuck Schumer; Sen. Sherrod Brown of Ohio, the top Democrat on the Senate Banking Committee; Warren and others.

Even if English loses, it buys the bureau’s allies some time. The CFPB showdown is upping political pressure on Trump to nominate and confirm a permanent director to a five-year term. Until then, however, Mulvaney can stick around, essentially lengthening the amount of time Republicans control the agency. The goal, then, is to end the OMB director’s temporary tenure as quickly as possible.

Warren on Monday called for a quick nomination and confirmation.

“It’s not clear how long an interim appointment or appointments might last,” she told reporters. “When Donald Trump nominates someone to be the head of the agency, it will then come over to Congress, and every Republican is going to have to take a close look at that and decide whether they want to go with a director who is on the side of the banks or a director who is on the side of hard-working families.”